U.S. corporate giants post record-breaking results despite headwinds, strongest in five years

[Financial News] U.S. companies are expected to post their strongest earnings growth in five years in the second quarter, despite higher energy prices, elevated interest rates and concerns over slowing consumer demand. Backed by increased investment in artificial intelligence (AI) and a strong energy market, earnings improvements are spreading beyond technology stocks to sectors such as finance and defense.
On the 2nd, local time, the Financial Times (FT), citing market research firm FactSet, reported that net profit for S&P 500 companies in the second quarter is expected to rise 47.4% from a year earlier. The figure is based on market estimates for more than 300 companies that have already reported results, as well as those yet to announce earnings, and marks the highest quarterly growth rate in the past five years.
According to FactSet, about 90% of the companies that have reported so far beat market expectations, and eight of the 11 sectors posted double-digit profit growth.
Hugh Gimber, global market strategist at JPMorgan Chase, said recent corporate earnings have been very positive. He noted that technology remains in the lead, but unlike the previous earnings season, healthy results are now coming from a much broader range of industries.
Daniel Morris, chief market strategist at BNP Paribas Asset Management, also said that the broader economic impact of expanded AI infrastructure investment is lifting corporate profits beyond the technology sector.
By sector, energy companies stood out, benefiting from higher global oil prices. Exxon Mobil Corporation and Chevron reported combined second-quarter net profit of $26.5 billion on the day.
Defense contractors Lockheed Martin, General Dynamics, L3Harris and RTX also posted higher net profits than a year earlier, supported by U.S. munitions restocking and increased defense spending.
Big Tech also continued to deliver strong results, riding the AI investment boom. Google posted net profit of $11.2 billion, a fourfold increase, helped by returns from its investment in SpaceX shares, while Amazon more than tripled its net profit on the back of growth in its cloud business.
The financial sector also benefited from higher trading activity driven by increased AI investment. Major banks including JPMorgan Chase, Goldman Sachs, Citigroup and Bank of America (BofA) saw trading revenue rise sharply on stronger AI-related stock trading.
Strong corporate earnings are becoming a pillar supporting the U.S. stock market. Although volatility in technology shares has increased amid concerns over the sustainability of the recent AI investment frenzy, the S&P 500 Index has risen 9.4% so far this year. Richard Saldanha, equity portfolio manager at Aviva Investors, said technology and energy remain the main drivers, but it is important that the rally is spreading to other sectors as well.
However, some say these results are far removed from the reality felt by U.S. consumers. During the April-to-June period covered by the earnings reports, gasoline prices averaged above $4 per gallon, while consumer sentiment fell to a record low.
Joe Brusuelas, chief economist at accounting and consulting firm RSM, said the wealth effect has become stronger as the gap between asset owners and non-owners widens in the U.S. economy.
P&G also said budget pressure is intensifying for lower-income households. Andre Schulten, chief financial officer (CFO), said, "Lower-income consumers are essentially living paycheck to paycheck."
[email protected] Hong Chaewan Reporter